For many Canadians, the U.S. Presidential race is the gift that keeps on giving. As the election frenzy continues in the build-up to November 8, Canada basks in some welcome global publicity, as universal healthcare, Justin Trudeau’s hair, and quips about Americans fleeing north of the border have all grabbed the news.

But these are testing times for a nation still reeling from a two-year global oil crisis. I previously covered the devastation in Alberta in the aftermath of crude oil’s downward spiral, but no province has emerged unscathed. Such are the perils of a single commodity-driven economy. Structural flaws persist nationwide, with weak business investment and declining exports dragging down the national GDP, which posted -0.4% growth last quarter.[1] The Bank of Canada (BoC) has mirrored the dovish stewardship of the U.S. Federal Reserve in a bid to keep growth prospects alive, but also downgraded its economic outlook through 2018.[2] More recently, reports of anemic domestic demand, seen in disappointing retail sales, are fuelling speculation that the BoC might cut interest rates even further, veering ominously closer to the Bank of Japan’s negative interest rate model.[3]

It has often been remarked that Canada’s economy will live and die by its trade with the U.S.; Canadian exports to the U.S. total 20% of its GDP. But with free trade under threat this Presidential race, the stakes for Canada have rarely been higher. Perhaps no other election cycle has been so clearly defined by the dynamic, of establishment politician against change agent, as this one. Donald Trump has ridden waves of populist momentum to arrive at the Presidential ticket, vowing to shake up the political establishment in Washington that he alleges Hilary Clinton represents. Trump’s appeal lies in his patriotic fervour, with his base latching onto the nativist current that has shaped his positioning on immigration as well as economic policy.

Central to his economic message is a protectionist platform that has tapped into the growing inferiority complex of an “insular U.S. trade sector,” as CIBC’s executive director of macro strategy, Bipan Rai, put it.[4] The Clinton campaign may have gone on about “Trumped-up trickle-down economics” to brand him as big-business, but tax cuts only form part of the narrative, with an anti-globalization theme very much guiding his economic agenda. The intended impact is two-fold, with tax cuts proposed to spur growth, while tariffs and “tough-on-trade” policies aim to keep jobs in the U.S. There is still some ambiguity on the latter, but were Trump to fulfill his earlier promise of “tearing up NAFTA,” it would do nothing short of decimating the Canadian economy. Sal Guatieri, senior economist at BMO Nesbitt Burns, comments that a U.S. secession from NAFTA would “wrench into highly integrated supply chains, and create uncertainty for exporters and importers,” adding that Canada’s economic challenges “would mount if it lost preferential access” to the American market, which has consumed 76 per cent of Canadian goods exported in the past decade.[5] It has been debated whether withdrawing from NAFTA lies within the scope of Presidential authority – indeed, Congress could likely step in. But the very notion of a U.S. President going on an anti free-trade vendetta is problematic for a country that is perhaps the prime beneficiary, historically, of commerce with the U.S. Another casualty of a Trump Presidency would be the Trans-Pacific Partnership (TPP) deal, which he has sworn not to ratify – unfortunate for Canada, as the TPP aims to lower trade barriers and enable cheaper imports, enhancing productivity and, ideally, incomes.[6]

It remains to be seen how much of this is empty rhetoric and hyperbole. No candidate from either party in recent memory has railed against free trade to such an extent. The GOP establishment is still in disbelief that swaths of its electorate have spurned the open market ideals of supply-side neoliberalism, championed for so long by the likes of Ronald Reagan, the Bushes, John McCain, Mitt Romney, John Kasich and numerous other Republican stalwarts. Previous Presidential races have more or less assured Canadians that trade relations with the U.S. would be left intact regardless of the outcome. But this an electoral cycle that has defied conventional political thinking.

Unlike the real estate mogul, Clinton boasts an extensive White House resume, allowing plenty of insight into the type of governance we can expect from her. That being said, a hard-fought Primary with Bernie Sanders has pushed her to the left on several issues, not least foreign trade. Clinton lauded NAFTA in 1996 shortly after its inception, before doubling down in the 2007 Democratic Primaries, and once again since she announced her bid for the nomination over a year ago.[7] It is no surprise that she has been the most vocal against NAFTA when she has been running for positions and less so when actually in office. Despite her recent statement that NAFTA must be “renegotiated to give American workers a level playing field,” the agreement has hardly changed in Clinton’s twenty-year tenure in the most powerful spheres of American politics, a streak that instead bodes well for Canada and Mexico.[8]

Is Trump likely to test the neighbour up north as well? Image Source: National Observer

Like Trump, Clinton has also disparaged TPP, but it is worth noting that previously, in 2012, she upheld TPP as “the gold standard of trade agreements,”[9] much to the ire of Trump and his supporters. And according to a WikiLeaks release of transcripts from a speech made to a Brazilian bank in 2013, she had described her vision of a “hemispheric common market, with open trade and open borders.”[10] Furthermore, the very premise of the Clinton Foundation, her long-running charitable organization, is the interdependence of global partners in economic development, and its operations depend on foreign sponsorship. As a proponent of globalization and a seasoned diplomat with long-standing ties to other nations, Clinton is hardly the unionist some of her campaign rhetoric may suggest. Instead, her statements sound more like the clever political jockeying that we have come to expect from her over the years. TPP could very well emerge a loser in either outcome, but Canada need not fear a Clinton administration going after NAFTA, or attacking the premise of free-trade, or pursuing anything close to a protectionist, isolationist agenda that would seriously threaten exports.

Ultimately, Canada’s economic well-being is not a priority for either candidate – job growth for Middle America is. But the GOP frontrunner is willing to go far greater lengths than Clinton, and his electoral base – very much concentrated in the blue-collar, trade sector – expects him to. While Hilary has talked tough on foreign trade, her public record, along with the backing of most of the establishment, only points to an extension of the status quo, and therefore some stability for the Canadian economy at a time when it is needed. And so when Canada watches on November 8, it will indeed have a horse in the race, and it won’t be Trump.

Kabir Vassanji graduated from McGill University in Montreal, Canada, with a degree in Finance and International Business in 2015. He has interned in the fields of wealth management and capital markets, and now works at an investment bank. His areas of interest include finance, economics, technology, and foreign affairs. Particularly of interest is the intersection of finance and macro-economic policy, within his home country Canada, as well as in emerging markets. In exploring these topics with InPRA, Kabir hopes to enhance his writing and research skills to complement his quantitative background.